Comparison of Volatility Measures: a Risk Management Perspective
Christian Brownlees () and
Giampiero Gallo ()
Econometrics Working Papers Archive from Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti"
In this paper we address the issue of forecasting Value–at–Risk (VaR) using different volatility measures: realized volatility, bipower realized volatility, two scales realized volatility, realized kernel as well as the daily range. We propose a dynamic model with a flexible trend specification bonded with a penalized maximum likelihood estimation strategy: the P-Spline Multiplicative Error Model. Exploiting UHFD volatility measures, VaR predictive ability is considerably improved upon relative to a baseline GARCH but not so relative to the range; there are relevant gains from modeling volatility trends and using realized kernels that are robust to dependent microstructure noise.
Keywords: Volatility Measures; VaR Forecasting; GARCH; MEM; P-Spline. (search for similar items in EconPapers)
JEL-codes: C22 C51 C52 C53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-fmk, nep-for, nep-mst and nep-rmg
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Journal Article: Comparison of Volatility Measures: a Risk Management Perspective (2010)
Working Paper: Comparison of Volatility Measures: a Risk Management Perspective (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:fir:econom:wp2008_03
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